Can you name the 12 members of OPEC?

Why do we care about

OPEC oil?
Who are the main players
involved in the supply?

Players

The diagram below summarises the role of some key players in the
energy supply

What influences oil pricing?

2 main determining factorsa)

Price of oil on the free market (demand and supply conditions)
b)
Oil quality
Crude oil is the MOST TRADED COMMODITY (good) in the world
It can be sold as a futures contract' where buyer agrees to take
delivery and seller agrees to supply a fixed amount at a pre
arranged price in specific location
Aims to avoid price fluctuation by ensuring future demand for supply in
reliant industries (like Airlines)
Crude oil comes in varieties and is proced accordingly- Brent crude
from the North Sea is the bench mark- all other oil is worth less
and priced in relation to that
2008Oil prices continuously increased supply
could not keep pace with demand
(esp. from China)
OPEC worried about increasing output as
then investors may feel theres a glut
on the market and drop prices,
affecting OPEC economies

OPEC Members

OPEC Member Countries:

Joined OPEC

Location

Algeria

1969

Africa

Angola

2007

Africa

Ecuador(**)

rejoined 2007

South America

IR Iran*

1960

Middle East

Iraq*

1960

Middle East

Kuwait*

1960

Middle East

SP Libyan AJ

1962

Africa

Nigeria

1971

Africa

Qatar

1961

Middle East

Saudi Arabia*

1960

Middle East

United Arab Emirates

1967

Middle East

Venezuela*

1960

South America

Country

*founder Members
** Ecuador joined OPEC in 1973, suspended its membership from
Dec. 1992-Oct. 2007

The economics of oil

OPECs objective is to coordinate petroleum policies
amongst members
To ensure fair and stable prices for producers
An efficient economic and regular supply to consumer
nations
A far return on capital for those investing in industry
OPEC was formed in 1960 to protect interests of oil
producing countries
At the time oil in mid east was controlled by TNCswho raised and lowered prices as they wished to do
so.
In 1960 faced with a glut of oil prices were loweredreducing taxes and royalties for oil producers so 5 oil
producers came together and OPEC was formed-

 Some people say OPEC is a CARTEL

(Association of producers or suppliers
formed to monopolise the production
and distribution of a product or service
to control prices etc. In politics a cartel
is an alliance of parties or interests
created to further common aims)

What is OPEC?
The Organization of the Petroleum Exporting
Countries (OPEC) is a permanent
intergovernmental organization of 12 oilexporting developing nations
It aims to
Protect the interests of member countries
Stabilise oil prices
Ensure efficient , economic and regular supply of
oil

OPECs role in energy supply:

Sets oil production quotas (numbers) for members in
response to economic growth rates and demand
supply conditions.
If demand suddenly rises OPEC can increase production
to prevent sharp price rises
It can also be reduced to maintain price if demand falls
Aims to get fair price for members without swamping
the market or restricting it (forcing price up)
At the end of 2006 had proven reserves of over
900,000 million barrels of crude oil (nearly 78% of
the worlds total reserves)
They produce about 45% of the worlds crude oil and
18% of its natural gas

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Task
Read pages 32 33 Oxford and page
20 OUP
Complete the Facebook profile for
OPEC
Briefly explain why OPEC is such a
powerful player in the energy game

Homework- Powerful players in the global supply

of energy
OPEC
1)
2)
3)
4)

What is OPEC?
What are the aims of OPEC?
How much power does OPEC have?
What countries are not part of OPEC and why might they
have chosen not to be a member?
5) Why could it be argued that both oil producing countries,
benefit and suffer from OPEC?
6) Exam style question7) Assess the impact of OPEC on global oil supply and
demand (10)

The role of energy TNCs

Task
Build a brief fact file of an energy TNC to illustrate its
importance as an energy player. You should cover the following
points:

Country of HQ
Areas of operation
Share of market/turnover
Evidence of political power
Plans for future diversification

8. ENI
ENI or Ente Nazionale Idrocarburi is an Italian-based, government backed multinational company started
in the 1920s with the official incorporation finalized about 30 years later. With strong presence inside its
country of origin and worldwide, the company is now ranked as the third largest oil refiner in Europe,
behind Shell and Total. ENIs core businesses include exploration and production, gas, power, energy,
engineering, technology and construction.
Sales = $119.27 billion, profits = $13.70 billion, assets = $128.015 billion, market value = $127.38 billion.
9. Petrobras (Brazil)
Based in Rio de Janeiro, Brazil, Petrobras inception was highly credited to the countrys two-time
President, Getulio Vargas, whose political career ended with a suicide. Between 1950s up to the turn of
the 20th century, Petrobras was the monopoly for the oil and gas industry in Brazil and played a big part in
driving the countrys economy. Apart from its native country, the company also has significant presence in
North America, South America, Africa, Europe and Asia.
Sales = $87.52 billion, profits = $11.04 billion, assets = $129.98 billion, market value = $236.67 billion.
10. PetroChina (China)
One of the most profitable companies in Asia, PetroChina was also ranked by Forbes as the largest
company in China, and 55th in the overall worldwide ranking. Through prudent management and operation,
the company has been presented with a string of awards by international magazines that include the best
company in dividend payout policy, best investor relation, and best corporate governance. PetroChina is
publicly traded in a few major stock exchanges including New York, Hong Kong and Shanghai.
Sales = $88.24 billion, profits = $18.21 billion, assets = $111.70 billion, market value = $546.14 billion.

5. Chevron (United States)

Chevron is also another spin-off from the Standard Oil company, and made its mark after
discovering the worlds largest oil field in Saudi Arabia in the 50s. Chevron has commercial
interests in pretty much everything related to oil and gas - exploration, production, transportation,
logistics, marketing and trading, manufacturing, polymer, chemicals and power. The company
operates in more than 80 countries worldwide, providing employment to more than 50,000 people
across all major continents.
Sales = $203.97 billion, profits = $18.69 billion, assets = $148.79 billion, market value = $179.97
billion.

6. Gazprom (Russia)
Gazprom is Russias largest company, and controls as much as 90% of the countrys overall
production of gas. Its overall capacity also accounts for more than 15% market share of the
worlds gas reserve. On top of that, the company boasts its presence by owning a gas pipeline
network stretching some 150 thousand kilometers in length, currently the longest pipeline in the
world. Apart from oil and gas, Gazprom also has business interests in finance, insurance, banking,
communication, media, agriculture and construction.
Sales = $81.76 billion, profits = $23.30 billion, assets = $201.72 billion, market value = $306.79
billion.
7. ConocoPhillips (United States)

ConocoPhillips is listed among the Six Supermajors alongside ExxonMobil, Shell, BP, Chevron and
Total. The Supermajor refers to the worlds largest non-state owned energy companies. As of
today, the company operates in close to 40 countries worldwide, with its headquarter located in
Texas, United States, and employing more than 30,000 staff. Conoco runs service stations under
different brand names such as ProJET (Malaysia), COOP (Switzerland) and Turkpetrol (Turkey).
Sales = $171.50 billion, profits = $11.89 billion, assets = $177.76 billion, market value = $129.15
billion.

2. Royal Dutch Shell (Netherlands)

Two companies - Royal Dutch Petroleum of Netherlands and Shell Transport and Trading
Company of United Kingdom decided to merge their operations in the early 20th
century. The result is the formation of The Royal Dutch Shell Group with 2 main offices,
one in The Hague (Netherlands), and another in London (United Kingdom). The
formation of the new entity also signaled the groups intention to compete with the
then dominant Standard Oil company. After more than a century, seems like it is doing
well.
Sales = $355.78 billion, profits = $31.33 billion, assets = $266.22 billion, market value
= $221.09 billion.
3. BP (United Kingdom)

The founding of BP was almost concurrent with the formation of the Shell Group, but it
had to endure a path full of controversies and complexity. BPs history is always linked
to the middle east oil struggle, Americas CIA agents, and the coup of the Iranians
power to protect the companys commercial interest in the country. After merging with
Amoco, the group was known as BP Amoco albeit for only a while before reverting back
to BP. While BP originally denotes British Petroleum, the company is transitioning its
name to Beyond Petroleum to reflect its global reach and operation.
Sales = $281.03 billion, profits = $20.60 billion, assets = $236.08 billion, market value
= $204.94 billion.
4. Total (France)

The French government was once approached by the Shell Group to be part of the
company, but instead of agreeing for a partnership deal, the then Prime Minister,
Raymond Poincare decided to form something original, and something French. Under
his directive, a company by the name of Compagnie francaise des petroles, or CFP was
founded in 1924 which was also made as a commercial tool in case of war. A number of
mergers and acquisition ensued in the next few decades, before the company settling
with its new name Total.
Sales = $199.74 billion, profits = $19.24 billion, assets = $165.75 billion, market value
= $181.80 billion.

Largest
1. ExxonMobil (United States)

The history of ExxonMobil stretches back all the way to the

19th century, through the inception of Standard Oil
company founded by John D. Rockefeller.
From a small outfit, Standard Oil grew enormously until it
was considered a monopoly, forcing the authority to split
the company to 34 different companies. Exxon and Mobil
are two of the resulting new entities, which in 1999 decided
to merge in a so-called the biggest merger in history.
Fortune also named ExxonMobil as
the worlds most profitable company, ahead of Shell and
General Electric.
Sales = $358.6 billion, profits = $40.61 billion, assets =
$242.08 billion, market value = $465.51 billion.

Lesson summary
Energy TNCs, OPEC countries and other
large producers are increasingly
powerful players in the global supply of
energy.

Task for lessons 5 and 6

Get into 3s
Each will do a facebook profile- but
for different key players
Russian Gas Giant Gazprom
OPEC
A named TNC (Exxon, BP, Shell)

Aneesha

Amardeep

Roxanne

Ummar

Aphrodite

Usman

Shahir

Oliver

Demola

Kiran

Mariya

Josh

Charles

Billy

Shanpreet

Grace

Chris